Purchaser duty surcharge:

The NSW Government introduced a 4% surcharge purchaser duty on the purchase of residential real estate by foreign persons from 21 June 2016. The surcharge is in addition to the duty payable on the purchase of residential property.

If a foreign person, purchases a residential property for $2 million, duty calculation is as follows:

Duty payable on $2 million is $95,490

Surcharge of 4% on $2 million is $80,000

Total payable is $95,490 + $80,000 = $175,490

The second significant change is that foreign persons will not be entitled to the 12-month extension for the payment of stamp duty for off-the-plan purchases of residential property, which applies to residents of Australia.

 

Who is an ordinary resident?

An individual is an ordinarily resident in Australia at a particular time if the individual has actually been in Australia during 200 or more days in the period of 12 months immediately preceding that time, and is not (or was not, immediately before their most recent departure from Australia) subject to any limitation as to time for their continued presence in Australia.

A New Zealand citizen is not classified as a foreign person if they hold a special category visa, within the meaning of section 32 of the Migration Act 1958 of the Commonwealth and whose continued presence in Australia is not subject to any limitations as to time imposed by law. However, they would still need to be ordinarily resident in Australia.

 

Land Tax surcharges also apply:

New Land Tax surcharges have also been introduced. The land tax liability will generally be the average of the unimproved land value for the current tax year and the unimproved land values for the previous two tax years. Where a parcel of land

was only recently created (for example, by subdivision or amalgamation) the average value will be based only on the values for those taxing dates when the newly created land item existed.

The surcharge is 0.75% of the taxable value of all residential land held by the foreign person as at midnight on 31 December each year. The surcharge may apply to existing land owners, not just new purchasers.

A foreign person who owns residential land with a total land value of $700,000.

The land tax payable on $700,000 is $3,588

The surcharge payable at 0.75% of $700,000 is $5,25

Foreign ownership means that any residential land is subject to the land tax surcharge, whether held by an individual or a company, even if that land would have been deemed exempt if owned by a resident.

A foreign person owns residential land with a total land value of $400,000.

The land tax payable is nil as the land is under the threshold of $482,000.

The surcharge is 0.75% of $400,000 which is $3,000.

* The 2016 land tax threshold has been used for illustrative purposes only

 

The information in this article has been sourced from the NSW Office of State Revenue. For further details see: http://www.osr.nsw.gov.au/taxes/spd